strategy-diamond

Hambrick and Fredrickson’s Strategy Diamond

Hambrick and Fredrickson’s Strategy Diamond is a simple means of illustrating how the different parts of a strategy fit together. The diamond creates a strategic direction for the future operations of a business by looking at five elements: arenas, differentiators, economic logic, vehicles, and staging and pacing.

Understanding Hambrick and Fredrickson’s Strategy Diamond

Developed by researchers Donald C. Hambrick and James W. Fredrickson, the strategy is fundamentally a practical approach to strategic plan creation.

Importantly, it seeks to determine a profit-centric strategy by providing a solid foundation of “sub-strategies” which make up the diamond. 

The strategy itself applies to any industry or organization where managers need guidance on key strategic decisions.

To assist with these decisions, Hambrick and Fredrickson identified five elements of strategy where a business should focus its efforts. 

These elements are:

Arenas 

Arenas describe where a business should be active. This includes products, markets, technologies, geographic areas, and value-creation strategies.

For example, Nike and New Balance operate in the same product and geographic arenas, but their value-chain arenas differ.

New Balance manufactures its shoes in the United States, while Nike shoes are predominantly manufactured in China, Vietnam, and Indonesia.

Differentiators  

Differentiators describe the factors that dictate how the business will achieve success in a given market.

Factors may include price, image, customization, styling, or product reliability.

Differentiators may be tangible, where a golf course with ocean views has a competitive advantage over a course that is further inland.

But they may also be intangible, such as logos, patents, or even brand equity.

Economic logic 

Economic logic explains how the business will achieve a return on investment.

Larger companies may rely on economies of scale to see a return, while others may rely on vertical integration or proprietary product features.

For a business to possess positive economic logic, its differentiators must be in alignment with its arenas.

This ensures that financial profits keep investors interested in the continual funding of operating costs.

Vehicles 

Vehicles describe how a business can enter the arenas that it determines the most profitable.

Potentially, this may include internal development, franchising, acquisitions, or joint ventures.

Toyota and Mazda came together to jointly own and operate a new car assembly plant in the United States.

Each company will contribute 50% of the establishment cost, and each will share certain technologies to reduce the cost of manufacturing.

Staging and pacing

Staging describes the sequence and speed of potential moves. In other words, how fast can the product be taken to market? When is the right time to begin marketing, advertising, or product expansion?

When a Tex-Mex restaurant chain wanted to expand beyond the city of Austin Texas, the company knew that it would be difficult to manage restaurants that were far away.

Ultimately, cities earmarked for expansion were those that were connected to Austin via a short, direct Southwest Airlines flight. This allowed managers to freely travel between new restaurants in a shorter amount of time.

Key takeaways

  • Hambrick and Frederickson’s Strategy Diamond is a useful strategic tool in a wide variety of markets, industries, and organizations.
  • A core belief of Hambrick and Frederickson’s Strategy Diamond is the cohesive and harmonious interaction of five elements: arenas, vehicles, differentiation, staging, and economic logic.
  • The strategy diamond provides a framework with which a business can envision future success. Importantly, the strategy guides how this success might be achieved in actuality.

Read also: Porter’s Five Forces.

Connected Strategy Frameworks

Porter’s Five Forces

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Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces

Porter’s Generic Strategies

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In his book, “Competitive Advantage,” in 1985, Porter conceptualized the concept of competitive advantage, by looking at two key aspects. Industry attractiveness, and the company’s strategic positioning. The latter, according to Porter, can be achieved either via cost leadership, differentiation, or focus.

Porter’s Diamond Model

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Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, related and supporting industries.

Porter’s Four Corners Analysis 

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Developed by American academic Michael Porter, the Four Corners Analysis helps a business understand its particular competitive landscape. The analysis is a form of competitive intelligence where a business determines its future strategy by assessing its competitors’ strategy, looking at four elements: drivers, current strategy, management assumptions, and capabilities.

Ansoff Matrix

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You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.

Blitzscaling Canvas

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The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

Blue Ocean Strategy

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A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

Business Analysis Framework

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Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Gap Analysis

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A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.

Digital Marketing Circle

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digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

Other strategy frameworks:

Additional resources:

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